Restrictive Covenant Drafting and Enforceability

A party seeking to convey an interest in real property may desire to place a restrictive covenant on the interest, creating a legal obligation in the person or entity receiving the interest to either perform or refrain from performing certain actions.  Such a covenant may already operate on the property, inasmuch as they frequently “run with the land,” meaning that the transfer of the property from owner to owner does not extinguish the covenant.  To what extent are these restrictive covenants enforceable, and how can their language maximize enforceability?

Section 689.01, Florida Statutes governs the manner in which many types of interests in real property may be conveyed, providing that, inter alia, no such interest may be “created, made, granted, transferred or released” by any means other than a written instrument, executed in the presence of two witnesses.  Although the Florida Statutes elucidate the manner in which such interests may be transferred, they do not, in most instances, create a framework for the interpretation of restrictive covenants running with the transfer.  For instance, Section 689.03, Florida Statues, establishes that such covenants are primarily to be interpreted through the slow progression of court decisions, providing that a conveyance shall have “full common-law covenants.” 

Florida courts have held that covenants are to be “strictly construed in favor of the free and unrestricted use of real property.”  See Mundy v. Carter, 311 So.2d 773, 774 (Fla. 1st DCA 1975).  Strict construction in this context means that any ambiguity in a covenant will be interpreted as providing for the unfettered use and enjoyment of the property to which it applies, effectively eviscerating the effect of the covenant.  Restrictive covenants must be written with a “plain and obvious purpose,” and may only be enforced “where their intent is clear and their restrictions are reasonable.”  See AT & T Wireless Servs. of Fla., Inc. v. WCI Communities, Inc., 932 So.2d 251, 255 (Fla. 4th DCA 2005).

Florida law disfavors the use of restrictive covenants in the conveyance of real property.  Therefore, the drafting of such covenants requires thoughtfulness and precision.  A party may utilize a restrictive covenant, provided that the covenant exhibits clarity of intent and purpose and provided that the covenant exhibits reasonableness in its application. 

Florida Statutes section 542.335 governs valid restraints of trade or commerce, and provides that enforcement of non-compete clauses are not prohibited so long as same are reasonable in time, area and line of business.  A court will not, however, enforce a non-compete agreement or clause unless it is set forth in writing and signed by the party against whom enforcement is sought.  See Florida Statutes § 542.335(1)(a) (2012). 

In the case of a non-compete covenant sought to be enforced against a former employee, agent, or independent contractor, and not associated with the sale of all or  a part of: (a) the assets of a business or professional practice, or (b) the shares of a corporation, or (c) a partnership interest, or (d) a limited liability company membership, or (e) an equity interest, of any other type, in a business or professional practice, a court presumes reasonable in time any restraint 6 months or less in duration and presumes unreasonable in time any restraint more than 2 years in duration.  See Florida Statutes § 542.335(1)(d)1 (2012).  These presumptions, however, are rebuttable.  Whether the restraints in area and line of business are reasonable will be in the discretion of the court.

Florida law favors the enforcement of non-compete agreements, and mandates that courts construe restrictive covenants, such as a covenant not to compete, in favor of providing reasonable protection to all legitimate business interest(s) established by the person seeking enforcement of the covenant.  See Florida Statutes § 542.335(1)(h) (2012).  

Indeed, if a person seeking enforcement of the restrictive covenant establishes that the restraint is reasonably necessary, the person opposing enforcement has the burden of establishing that the same is overbroad, overlong, or otherwise not reasonably necessary to protect the established business interest(s).  If the restraint in question is overboard, overlong, or otherwise not reasonable necessary to protect the legitimate business interest or interests, a court is then obligated by Florida law to modify the restraint and grant only the relief reasonably necessary to protect such interest(s).  See Florida Statutes § 542.335(1)(c) (2012).